The Securities Industry Association just got their comment letter posted at the SEC - apparently their perspective is a bit different than that of virtually all the other letters. You can read it here. The capsule summary: Screw investors. Don't do anything that would limit Wall Street's ability to defraud them with abandon. Selling shares and refusing to deliver them? Fine. Transparency? Bad. Limit options MMs from having equity investors subsidize their business? Bad. Stop deliberate failing? Bad. Pretty much tells you how the industry thinks - investor protection is down the toilet, the right of brokers to do whatever they feel like is paramount.
The number of canards, half truths and outright misstatements is mind boggling. Really. I could probably devote a week's worth of blogs to this, but why bother? The capsule summary covers it all nicely. These are the guys that sued to block the Utah law, and now they are trying to ensure that any amendments are so flaccid as to be a joke. Then again, they are the ones that stuck the locate versus borrow loophole in, so why be surprised?
Still, to see this in black and white is shocking. Makes my blood literally boil.
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So, I'm reading this article today about a hedge fund that allegedly naked short sold a bank to take advantage of expected ugliness emanating from hurricane Katrina hitting, and I'm nodding along, thinking, "Hey, this isn't bad..." when I was stopped dead by a rushing river of bullsh$t.
Here's the article. See if you can spot the bullsh#t.
A hint:
"The issue of just how widespread naked shorting is remains a matter of considerable dispute. Some contend the unsavory practice has all but disappeared since the NASD and SEC instituted new rules last year making it more difficult to engage in naked shorting. The new rules, commonly referred to as Regulation SHO, prohibit brokers from letting traders short a stock unless there are "reasonable grounds" for believing there are shares available to borrow.
But the latest allegations, if true, are an indication that naked shorting may still be going on in some circumstances."
WTF?
Contrast this statement with reality, and with the documented truth, which we know from a recent FOIA request on total failure to delivers/naked short sales on the NYSE.
That FOIA showed us that FTDs started 2005 at around 65 million on the NYSE, went well above 130 million, and as of the last recorded date (end of May, 2006) the number was....65 million!!!
We know this. It isn't subjective. It's not up for discussion or grabs. Those are the numbers.
And yet the author is either profoundly ignorant of the data, or prefers to invent a reality where that data doesn't exist.
Now, why would a journalist engage in that sort of deception - try to make it seem that this is all potentially in our heads?
Good question.
The data was cited in the NCANS letter to the SEC, which is now up on the SEC website. It has been widely discussed on this blog. It was all over the web. So how did it escape this "pro's" radar?
This is just more of the agenda of Wall Street. Wall Street lies to you. It tries to make it seem that it isn't ripping you off constantly. Financial journalists are beholden to Wall Street for their livelihood. They dance to whatever tune Wall Street presents for them. This is just a blatant example of distorting easily verifiable facts to spin an agenda. Happens every day.
Now, it could be that the FOIA data represents 65 million shares of stock that the dog ate. Of course, that doesn't explain how the dog ate them, and kept eating them, for years, with an increasing appetite during some months, but a pretty steady overall diet throughout.
However you slice it, the article misstates what is knowable and is known. We know that the problem on the NYSE has not diminished, AT ALL. We know that. The number of overall issues with over 10K delivery fails has actually INCREASED since Reg SHO was initiated, so we can extrapolate that the NASDAQ likely hasn't experienced much, if any, drop. So where is the contention, the uncertainty?
The "controversy" and "doubt" over the scope of the problem are inventions - pure fiction. Nobody has any doubt. They can read the numbers. The only doubt that is being created is at the behest of Wall Street, the DTCC, and the SEC, who are desperately trying to perpetuate a lie - that Reg SHO is working, and that naked short selling isn't a problem.
Knowing this, how can we believe a word that pubs like this write?
Short answer: We can't.
Someone ought to send the journalist in question the data, and ask him what is in doubt. And report back. Wanna bet it is something like, "Well, we don't NECESSARILY know that FTDs are naked short sales..." or some other equally lame and transparent sham excuse?
The other item in this article worth noting is the obligatory, "Those companies are all crap" defense that Wall Street advances to defend its short selling hedge fund customers. It wouldn't be a NY financial press article on the topic if that wasn't front and center. Here's TheStreet's:
"Over the past year, allegations of naked shorting have become rampant on Wall Street. Some executives have tried to paint short-sellers as merchants of evil who will stop at nothing in their effort to drag down healthy businesses. But clouding these claims is the fact that many of the supposed corporate victims either aren't profitable or face other problems -- raising the question of whether chicanery is really driving the decline in their shares."
Many of them. But some are profitable, and the other problems are inventions of those trying to destroy them. Here's another hint: All companies face problems. Business is not easy. Every day is another challenge. Every company on the planet faces risks - their 10K's all tell you that. So what the author is saying is that all companies either aren't profitable, or are like all other companies and face risks/problems.
The logic, such as it is, is so circular as to make one dizzy.
Just another day at TheStreet.